Solvay recently agreed to sell its pharma division for E4.5bn to Abbott, giving Solvay net liquidity of E2.5bn according to some estimates. Analysts told ICIS news recently that Solvay would look to expand in Asia. Arkema has a strong portfolio of chemical projects in Asia and sees it as a key growth region.

Reuter's suggests Clariant and Umicore might be good targets. "There are rumours of a bid by Solvay for Umicore if Solvay sells its pharmaceutical division. This is pushing the share price up," Kristof De Graeve at SG Private Banking says, according to the blog cafepharma

Wednesday, 28 October 2009

Austrian oil and chemicals group OMV is to intervene in the strategic planning and operation of Canada's Nova Chemical, following its acquisition earlier this year by Abu Dhabi’s International Petroleum Investment Co (IPIC).

IPIC is a partner with OMV in Austria-based plastics major Borealis and also holds a direct stake in OMV. NOVA was acquired in a $2.3bn (€1.5bn) deal .

According to ICIS news “The ongoing strategic analysis of NOVA's business revealed that IPIC needed to provide a higher degree of involvement in NOVA's operative business than originally envisaged,” OMV spokeswoman Michaela Huber told ICIS news.

The European Commission this week cleared an application by IPIC and OMV to share control of NOVA. IPIC hold a 19.6% stake in OMV. Borealis is jointly controlled by IPIC (64%) and OMV (36%).

OMV has been trying hard to expand its international reach. The failed acquisition of Hungary's MOL was a recent, long running attempt. IPIC is purely an investment vehicle but has been growing its chemical empire strongly.

Tuesday, 27 October 2009

Martin Evans of Cazenove analysts said in a note: "A good result, above consensus - with stabilisation continuing, and cost savings helping, although the recovery remains “fragile”. End market demand for paints, coatings and chemicals remains mixed, although Asia and Latin America remain much better. The US does not seem to be getting any worse although is still depressed. Inventory levels remain low due which should continue to help a steady restocking phase in due course, although customers remain cautious of building up too high inventories ahead of the year end.

The tentative recovery story continues, and with the Q3 results season now in full swing we will see if similar levels of recovery emerge across Europe's chemical sector.

The blog wonders if there are simply too many well-meaning public, semi-public and private groups vying to find a solution for the site, where Dow's ethylene oxide and ethylene glycol facilities are due to be closed in January.

Only a few weeks ago I reported on ICIS news a government spokeswoman saying there was currently a review being undertaken by regional development agency One North East “to see what investment would be needed for that plant to continue to be commercially active and what investment would be needed to change the end products it is producing. That’s going on at the moment. There isn’t anything else going on”.

The spokeswoman said money could be available for capital investment at the site if “a demonstrable, viable business case” was put forward.

Does the left hand know what the right hand is doing? Are there simply too many initiatives, causing confusion to everyone concerned? Who are North-east Science and Industry Council and how do they differ from North East Process Industry Cluster (NEPIC), One North East, and all the other agencies involved?

"This month’s announcement that former Synetix boss Bob Coxon, who heads up the North-east Science and Industry Council, would lead an urgent review of what the Teesside cluster of companies immediately needs from both private sector networks and regional and national government is not the first time that local agencies have addressed the problem - although it’s the first time they have talked publicly about it.

Mr Clarke revealed that ONE had been working for up to a year on a rescue plan for Dow before it pulled the plug on its ethylene glycol plant in June. Dow’s customer Croda followed suit a few days later. Artenius, for completely different reasons, was next. The big question is what happens now.

“We don’t yet have a proposition,” admitted Mr Clarke. But he’s working on it.

For Mr Clarke, an economist not a scientist, Wilton has been a sharp lesson in financial catalysis - the collision of micro and macro economics that’s sparked a sequence of events that are threatening to be both politically and economically destabilising for the region.

They are now being addressed with a series of initiatives at local, national and even European level.

It all began with the closure of nylon maker Invista and the loss of 300 direct jobs in February. A sprawling plant that had benefited from consistent investment, but whose miles of eerily silent pipes now shadow the Wilton site, Invista was among utility provider Sembcorp’s biggest customers. The speed at which Invista withdrew sent shockwaves through the industry, but while the impact locally was profound, the real wake-up call came with Dow.

Mr Clarke said he understood why many process employees on Teesside, who have seen a succession of high profile visits to struggling car manufacturers in the Midlands, felt Government treated theirs as the Cinderella industry. And it’s true that up until the new green generation of process plants began to populate Wilton and sister sites in the Tees Valley, London seemed remarkably reluctant to dirty its hands with Wilton, despite the sector’s huge economic impact.

Even energy and climate change minister Ed Miliband, whose portfolio would naturally bring him into contact with the process sector, was said to be surprised at the scope of the Wilton complex on a recent visit.

Mr Clarke defends the government’s record, but admits the agency had to be “creative” in securing what was then SFI (now GBI) funding for Sabic’s low density polyethylene plant, opening later this year, because the “scale of investment was out of sync with the job creation” - the crude Whitehall calculation used to justify writing a cheque from the Exchequer.

He insists that if the private sector comes forward with a sustainable investment proposal for Wilton, cash would be found to support it. Unfortunately, nobody has. And while national government has a role to play in addressing Teesside’s current problems, it’s not responsible for sorting them out, said Mr Clarke. “We are not going to have a nationalised chemical industry or another ICI. We have to come up with a private sector solution.”

And that is proving difficult. “Coming up to the recession we had lots and lots of independent companies, integrated through Sembcorp. While things were going well, Wilton was spiraling upwards. But the very advantage in an upturn becomes a potential disadvantage in the downturn because if one or two companies within that supply chain have difficulties, that upsets the products and by-products going back and forth. Then all of a sudden the advantages become a problem.”

He conceded, though, that there has been a marked reluctance to admit it. “We all need to move from a position of saying ‘does anyone care about the process industry’ and ‘can we be a bit more open about communicating what the issues are’, to coming up with a proposition that industry, central government and local authorities can support to make happen.”

Wilton was made great by one big bold experiment. Maybe now is the time for another.

Wednesday, 21 October 2009

Ukraine is to receive a $3.4bn International Monetary Fund payment in November. This will help shore up the country's ailing finances, including a huge budget deficit. Ukraine has been hit hard by collapsing demand for export such as steel. Its chemical sector has also suffered as domestic and regional sales collapsed in the wake of the financial crisis.

Here's a report from local news agency. "Ukraine expects the International Monetary Fund to release a $3.4 billion payment under the agency’s $16.4 billion lending program to the country, Economy Minister Bohdan Danylyshyn said, according to Bloomberg.

“This will help sustain the economy and, to a certain extent, help cover the budget deficit,” Danylyshyn said today in an interview at Ukraine’s Consulate in New York. “It’s a pretty complicated situation in Ukraine, that’s why we expect (a) budget deficit this year and next.”

Ukraine is relying on the IMF loan program to stay afloat after the credit crisis undermined demand for its raw materials, including steel exports. The country has received $10.6 billion in loans to date.

The IMF team, led by Ceyla Pazarbasioglu, arrived in Kiev earlier this week to assess whether Ukraine meets the terms of the loans. Ukraine is at “serious risk” of veering off track ahead of the country’s next review in November, Fitch Ratings said in a statement on Oct. 14.

“It would be politically right to support the government’s measures aimed at stabilizing the situation,” Danylyshyn said. “That would also be a very good signal for investors.”

Tuesday, 20 October 2009

Survival is the name of the game for Central and East Europe’s (CEE) chemical industry over the next few years. Huge challenges remain:- Poor domestic and regional economic growth- Lack of state intervention to shore up economic recovery: many countries have no resources to do so as they are nearly bankrupt- No state money to rescue ailing chemical companies- Sluggish recovery in export markets- Inefficient and small companies which cannot compete globally

Is the region better placed for recovery than western Europe?

- Large parts of CEE are landlocked and therefore less exposed to competition from Middle East imports- Economic growth, when it comes, has the potential to be fast and strong- Higher oil prices will fuel recovery in Russia- Privatisation could yield great results in Poland

My view? This region has great potential and with good corporate leadership it will recover strongly. Good corporate leadership is not consistent across the region and more consolidation is vital.

Thursday, 15 October 2009

Hungary's BorsodChem has reached an agreement with China's Wanhua, allowing it a future as a minority shareholder but not to control the company.

According to portfolio.hu, it seems Wanhua has given up its intention to squeeze out owner Permira and become a majority owner of the Hungarian company.

"After three days of intensive negotiations, the management and the majority shareholders of Hungarian chemicals firm BorsodChem signed an agreement in principle with representatives of Wanhua Industrial, a China based holding, which controls Yantai Wanhua.

The parties also reached an agreement on BorsodChem’s debt restructuring plan, which enjoys a strong support by the senior lenders and the Hungarian government.

"This is a very important step for the financial restructuring of BorsodChem and the implementation of our growth plan", stated Wolfgang Büchele, CEO of BorsodChem after the negotiations.

"This result is good for BorsodChem, its customers, suppliers and the employees in particular", Büchele added. "But there is still a long way to go. Several questions remain unresolved for the time being and will be addressed only at a later stage. The delegates agreed on further negotiations in due course to discuss the open questions in a friendly and constructive manner."

The negotiations, which took place in Budapest, were attended by Wolfgang Büchele, representatives of the shareholders Permira and Vienna Capital Partners and Wanhua Industrial, including Chairman Jiansheng Ding.

Last week, in a meeting with senior lenders of BorsodChem the banks expressed their strong support of the current management of BorsodChem and their expectations that the current management continues to operate BorsodChem during the implementation of the growth plan.

Wednesday, 14 October 2009

Russian gas giant Gazprom has signed an initial contract to supply China with natural gas. The news may peturb those chemical companies in central and eastern Europe who are nervous about reliable gas supplies this winter, particularly those who rely on gas flowing through Ukraine.Last winter large parts of the chemical sector in Ukraine and other countries were affected by lack of gas reserves.According to the Associated Press, "Gazprom's chief executive Alexei Miller (pictured, right) said the agreement between Russia's state-run natural gas monopoly and China National Petroleum Corp. calls for the supply of 70 billion cubic meters of gas a year. A price had not been set and no contract signed yet.Chinese media reports have said the agreement is expected to be a gas-for-loans deal similar to a $25 billion oil-for-loans deal that was completed earlier this year.Russia and China are increasingly overcoming traditional mistrust to push ahead on mutual economic interests.Russia's cash-strapped energy companies need Chinese funding, while Beijing has welcomed the chance to further diversify sources for energy needed to fuel its fast-growing economy. The global economic crisis and changing market conditions have further spurred cooperation as lower demand from Europe has spurred Russia to diversify markets for its oil and gas."

China's Wanhua Industrial Group has been building a stake in the group by purchasing large amounts of mezzanine or junior debt. A familiar battle for BorsodChem may be brewing (see earlier entries).

According to Reuters, "BorsodChem said that chemicals firm Wanhua may become a minority equity holder but any cooperation should be discussed only later and must be based on contractual agreements typical in the industry.

"In a meeting with senior lenders ... the Senior Steering Committee of the senior syndicate expressed its strong support of the current management of BorsodChem and its expectations that the current management continues to operate BorsodChem after the implementation of the debt restructuring plan," the firm said.

"Permira Funds and Vienna Capital Partners should remain majority shareholders, as was made clear by the banks," BorsodChem said.

The news seems to confirm what Stan Higgins at NEPIC (North East Process Industry Cluster) and the UK government told me last week. We'll have to wait and see if a white knight emerges to rescue the operation, as some were suggesting (see earlier entries).

Thursday, 8 October 2009

Colleagues returning from the EPCA conference in Berlin spotted Third Coast executives entering a meeting with people from Dow Chemical. Could it be that the two companies are negotiating together with direct input from UK business secretary, Peter Mandelson, to rescue Dow's ethylene oxide/ethylene glycol plant at Wilton, Teesside?

This would explain why Stan Higgins, CEO of industry group the North East Process Industry Cluster was so adamant that no deal was being struck. Also why a government spokeswoman was also so sure. Could Mandelson simply be by-passing his own department?

Dow's plant is scheduled for closure in January (see earlier entries).

Tuesday, 6 October 2009

On Sunday ICIS reported that US-based Third Coast Chemicals was negotiating a takeover of the Dow Chemical ethylene oxide/ethylene glycol (EO/EG) site at Wilton, UK, scheduled for closure in January 2010.

We'd got confirmation of a Sunday Times report from Martin Staley, EMEA vice president for Third Coast who told ICIS: “We’re working with the North East Process Industry Cluster (NEPIC) to see if there’s an opportunity that the plant can be saved.” The company had previously worked on a takeover plan which had stalled in May this year.

However NEPIC CEO Stan Higgins later told ICIS that no negotiations were going on with Third Coast or anyone else. A spokeswoman for the UK’s Department for Business, Innovation and Skills added: “We’re not in any negotiations with Third Coast at the moment. I don’t believe we’re in negotiation with any other parties.”

Higgins was very upset about the Sunday Times report, claiming it gave false hopes to workers at the plant.

Now a source from the EPCA meeting in Berlin insists negotiations are going ahead with Third Coast. Could Dow and Third Coast be secretly negotiating without the knowledge of Stan Higgins at NEPIC and the DBIS? The plot thickens......

Monday, 5 October 2009

The Sunday Times reported yesterday that US producer Third Coast Chemicals is in talks to take over the Dow ethylene oxide and ethylene glycol facility at Wilton.This would be excellent news for Wilton and the UK chemical industry in general.

The Dow plant was the UK's only producer of EO/EG and it is dangerous to transport. The question now is: will Croda now reverse its decision to close the downstream ethoxylates and surfactants plants. It decided to close these in the wake of the Dow closure.

The Times article sated "Ministers are to examine plans to inject tens of millions of pounds into an American-led project to revitalise the chemicals industry in the northeast and save thousands of jobs.

It would see Texas-based Third Coast Chemicals take control of a key plant at the former ICI chemicals complex at Wilton, Teesside. State agencies would provide most of the £50m funding in what is regarded as the first leg of a strategic review by the government of the chemicals industry.

Senior industry sources told The Sunday Times this weekend that the government was in the early stages of formulating an assistance programme to the beleaguered £60 billion-a-year industry. It employs more than 200,000 workers and has been among the worst affected by the recession.

The Department for Business denied that the government had launched a strategic review but it is understood that a team within the Shareholder Executive has begun working on a strategy and has made Wilton a top priority."